108
Notes to the Consolidated Financial Statements (continued)
30. Financial risk management and financial instruments (continued)
Trade and other receivables
Allowances
Investments
Guarantees
Exposure to credit risk
Report of the
Report of the
1 Financial 1
Sustainability
Other
Introduction
Executive Board
Supervisory Board
1 Statements 1
Review
Information
Heineken N.V. Annual Report 2017
HEINEKEN's local management has credit policies in place and the exposure to credit risk is monitored on an ongoing basis. Underthe credit
policies, all customers requiring credit over a certain amount are reviewed and new customers are analysed individually for creditworthiness before
HEINEKEN's standard payment and delivery terms and conditions are offered. HEINEKEN's review can include external ratings, where available,
and in some cases bank references. Credit limits are established for each customer and these limits are reviewed regularly. Customers that fail to
meet HEINEKEN's benchmark creditworthiness may transact with HEINEKEN only on a prepayment basis.
In monitoring customer credit risk customers are, on a country basis, grouped according to their credit characteristics, including whether they
are an individual or legal entity, which type of distribution channel they represent, geographic location, industry, ageing profile, maturity and
existence of previous financial difficulties. Customers that are graded as high risk are placed on a restricted customer list, and sales are made on
strict payment conditions only with approval of management. In addition HEINEKEN issued an Anti-Money Laundering and Sanction Letterto
safeguard our reputation and operations. HEINEKEN considers it important to know with whom business is done and from whom HEINEKEN is
receiving payments.
HEINEKEN has multiple distribution models to deliver goods to end customers. Deliveries are done via own wholesalers, directly or via third parties,
depending the countries specifics. As such distribution models are country-specific and diverse across HEINEKEN, the results and the balance
sheet items cannot be split between types of customers on a consolidated basis. The various distribution models are also not centrally managed
or monitored.
HEINEKEN establishes allowances for impairment of loans, trade and other receivables that represent the estimate of incurred losses. The main
components of these allowances are specific loss components that relates to individually exposures, and a collective loss component established for
groups of similar customers in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on
historical data of payment statistics.
HEINEKEN limits its exposure to credit risk by only investing available cash balances in deposits and liquid securities and only with counterparties
that have strong credit ratings. HEINEKEN actively monitors these credit ratings.
HEINEKEN's policy is to avoid issuing guarantees where possible unless this leads to substantial benefits for HEINEKEN. In cases where HEINEKEN
does provide guarantees, such as to banks for loans (to third parties), HEINEKEN aims to receive security from the third party
Heineken N.V. has issued a joint and several liability statement to the provisions of Section 403, Part 9, Book 2 of the Dutch Civil Code with respect
to legal entities established in the Netherlands. Refer to Note 42 of the Company financial statements.
The carrying amount of financial assets and guarantees to banks for loans represents the maximum credit exposure. The maximum exposure to
credit risk at the reporting date was:
In millions of
Note
2017
2016*
Cash and cash equivalents
21
2,442
3,035
Trade and other receivables, excluding derivatives
20
3,277
3,004
Current derivatives
20
219
48
Available-for-sale investments
17
481
427
Non-current derivatives and investments FVTPL
17
36
254
Loans to customers
17
54
58
Advances to customers
277
274
Loans to joint ventures and associates
17
3
18
Other non-current receivables
17
193
175
Guarantees to banks for loans (to third parties)
32
307
335
7,289
7,628
Revised to include advances to customers.
